In a major regulatory development, the U.S. Federal Trade Commission (FTC) has initiated an investigation into OpenAI, raising concerns about the potential violation of consumer protection laws and the compromise of personal data and reputations. This move represents the most significant regulatory challenge faced by the Microsoft-backed startup thus far.

The FTC recently issued a comprehensive 20-page request for records to OpenAI, specifically focusing on how the company addresses the risks associated with its generative artificial intelligence chatbot, ChatGPT.

The agency's objective is to examine whether OpenAI has engaged in unfair practices that have resulted in "reputational harm" to consumers.

This investigation is part of FTC Chair Lina Khan's broader effort to regulate and rein in technology companies. It comes shortly after the FTC faced a major setback in court in its attempt to prevent Microsoft from acquiring Activision Blizzard. However, the FTC has stated its intention to appeal the court's decision.

Among the topics outlined in the FTC's information request to OpenAI is the inquiry into the measures the company has taken to mitigate the potential for its products to "generate false, misleading, or disparaging statements about real individuals."

The Washington Post was the first to report on the investigation. While the FTC declined to comment, OpenAI has not yet responded to the request for comment.

OpenAI introduced ChatGPT in November, captivating consumers and inciting competition among major tech companies to showcase the transformative impact of AI-driven products on societies and businesses.

As the AI race intensifies, concerns have arisen regarding potential risks and the need for regulatory oversight of this technology.

Global regulators are striving to apply existing regulations that cover various aspects, including copyright, data privacy, and two critical issues: the data used to train AI models and the content they generate, as reported by Reuters in May.

In the United States, Senate Majority Leader Chuck Schumer has called for the development of "comprehensive legislation" to advance AI and ensure the implementation of safeguards. He plans to organize a series of forums later this year.

OpenAI also faced difficulties in March when Italian regulators forced the temporary shutdown of ChatGPT due to allegations that OpenAI violated the European Union's General Data Protection Regulation (GDPR), a comprehensive privacy framework enacted in 2018.

Following negotiations, ChatGPT was eventually reinstated after OpenAI agreed to incorporate age verification features and allow European users to block the use of their information for training the AI model.

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